Comprehensive Healthcare Reform Arrives: Healthcare Analysts Look at What It Means
Source: Nightingale’s Healthcare News – April 2010
By: Steve Raphael
It took nearly 100 years of trying by two Republicans presidents, starting with Theodore Roosevelt, and five Democratic presidents, but Americans finally have national health reform. As the dust settles on the Health Care and Education Reconciliation Act of 2010 that President Barack Obama signed into law on March 23, the winners and losers are beginning to emerge.
The big winner appears to be the insurance industry and the 32 million uninsured, including children, who are now eligible for coverage. The American public stands to be the loser if costs aren’t controlled.
“We would have liked to have seen many more ways to control costs, but that just wasn’t going to happen in this law,” says Helen Darling, President of the National Business Group on Health. “We hope that this will be the most important problem to tackle immediately. Certainly, the President and the head of Office of Management and Budget have stressed the importance of controlling costs.”
“In eight years, if we all don’t control costs, perhaps we can tell everyone that we are giving our pay raises to the health system and to the federal government in a 40 percent excise tax on the amounts beyond the cutoff,” she adds.
The Congressional Budget Office (CBO) estimates that the healthcare bill will cost $940 billion and will produce a net reduction in federal deficits of about $140 billion from 2010-2019, a figure that many people question.
Just for starters under the law, consumers won’t be denied coverage for pre-existing conditions and physicians and the drug industry will benefit from the expansion in coverage and the increasing fees for Medicare primary care, says Len Nichols, an economist for New America, a Washington D.C. think tank. New America Foundation played a significant role in contributing to the reform legislation.
Not everyone is happy with the legislation, including the U.S. Chamber of Commerce, which represents many of the businesses that voluntarily foot the bill for employee health insurance to the tune of more than $500 billion annually.
Chamber President Thomas Donohue sent out an eight-page letter to his members in late March saying the Chamber will seek “changes [in the bill] in an effort to minimize the potentially harmful impacts of this bill on our members.” The Chamber argued everything included in the reform legislation could be done cheaper, while achieving the same improvements in the nation’s health.
The Chamber’s Senior Manager of Health Policy, James Gelfond, says the bill produced a number “of half measures at controlling costs.” It is weak on preventive care and value-based purchasing,” which pays providers for keeping their patients healthy. In the next three years, healthcare will be in “a slow crawl” until 2014 when the “big Kahuna comes into play” as taxes rise to help cover the costs of the legislation, he adds.
Darling says the most immediate challenge to employers is the takeaway of the tax deductibility of the retiree prescription drug subsidy that had been approved in 2003 to help some large employers with costly retiree medical benefits to continue to provide them.
Although the deductibility loss will not have a cash impact until 2013, financial accounting rules require that corporations report the change that resulted in substantial one-time charges to earnings. For example, A&T’s charge was $1 billion, she says.
Ron Wince, President and CEO of Guidon Performance Solutions, a management consulting firm that works with healthcare organizations to improve operational efficiency, says, “In general terms [the bill] does good things for people who don’t have coverage.
It will close the doughnut hole for seniors, but on the spending side will have some negative repercussions.”
While the bill does provide tax credits to small business to help them pay for their employees’ health insurance, Wince observes that the incentives for small business “are not significant to have an impact; I see premiums going up.”
All-in-all, some legislation had to be passed, says Wince, adding, “It would have been better to have smaller, better pieces of legislation passed over time.”
The insurance industry won an important victory when the public option, which it adamantly opposed, was not included in the legislation. Insurers feared that the government would have so of business. The new law does prohibit insurance companies from cherry picking healthy patients. However, when one window closes another opens: the industry will soon be insuring a new, very large, pool of individuals as they become eligible for coverage.
For example, in 2014 more people will become eligible for Medicaid, primarily childless adults, many under age 65. With some exceptions, most private insurers have shied away from the poor and unhealthy recipients, leaving insurers specializing in Medicaid, such as Molina Healthcare and WellCare Health Plans, with the field to themselves.
The changes will add 15 million Americans to Medicaid, according to estimates by the CBO, boosting enrollment by almost 30 percent. Roughly 60 million Americans receive Medicaid at some point during the year, says the Kaiser Family Foundation, and 47 million of those people are permanently on Medicaid.
Although many of the changes do not take effect for four years, investors seized on the potential gains. The price of shares of insurers that specialize in Medicaid sharply outpaced the rest of the industry in March. Centene Corp. rose more than 30 percent, and Amerigroup Corp. gained more than 20 percent. Molina and WellCare also outperformed.
Other provisions of note to employers and individuals: Starting in 2014, employers with 50 or more employees could face federal fines for not providing insurance coverage. Also starting in 2014, uninsured consumers who do not buy insurance would pay a penalty of $95 or 1 percent of income, whichever is more, the first year of coverage. The penalty could rise to as much as $695 or 2 percent of income.
All contents © 2010 Nightingale’s Healthcare News. All Rights Reserved.
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